Looking after high value items on loan

Following our feature ‘Borrowing Beauty’ in the June Bulletin, Annabel Brownhill, Insurance broker in Fine Art and Specie insurance at Howden Group outlines some key considerations when taking on prestigious object loans.

Are adequate protections in place?

Important risks are fire, theft, water damage and accidental damage. Sometimes items need to be presented in a particular way which mean they are more at risk. For example, an artist might want their work to be seen in natural light, or at a certain level on the wall which makes it more vulnerable. Consideration will need to be given to where the item is to be kept and whether this is in an area with a monitored theft and fire alarm. Should the item be kept in a special case or have alarmed fixtures attaching it to the wall? There should be procedures in place in the event alarms are triggered.

Access to the room where the item is kept will need to be controlled. Increased staffing, or redeployed existing staff may be required so an invigilator is present with the loan, along with the public. Maybe there should be signage to indicate that an exhibit is fragile?

For insurance claims, we frequently find damage occurs whilst objects are being moved. To give items the best protection, they should be properly packed and transported by professional fine art transporters.

Organising insurance for a valuable loan

Museums should normally be able to extend their collection insurance to cover loan items – likely to be a good value option. Some lenders prefer to keep their own insurance in place as they feel more comfortable with the insurance broker and insurance company they know well. The lender may ask the borrower to pay for the insurance. It is likely to be more expensive for the museum to have to pay for exhibition insurance where the lender’s policy is used, rather than their own, but sometimes it is the only way a lender will agree to loan a piece.

What sort of insurance cover and exclusions might you expect whilst an item is on loan?

Specialist loan or exhibition insurance would normally cover an item against all risks of physical loss or damage apart from the exclusions shown in the policy. Typical exclusions would be wear and tear, rust or oxidisation, insects, vermin, warping, shrinkage, rot, fungus, mould, or infestation. In the event of total loss, the insurance policy should pay a specified value for the loan piece, agreed between the lender and borrower. In the event of partial loss, the policy would normally pay the total of depreciation in value of the item because of the claim plus the cost of repair. Often repair costs are inexpensive but depreciation in value for a high value item can be exceptionally large indeed. For example, Howden worked on a claim for two Old Master pictures which fell from the wall. The cost of repair was EUR 6,000 but insurers also paid EUR 100,000 for depreciation in value of the artworks.

Other claims examples are when museum staff discovered a bug in a Frida Kahlo painting’s stretcher, when it was unpacked for exhibition. Although insect damage is normally excluded, insurers paid the claim because of their long relationship with the owner. A metal artwork valued at over £200,000 was accidentally damaged whilst on exhibition and the invigilator temporarily absent. Insurers paid for the piece to be remade costing almost £11,000. Finally, a common claim we are seeing is fire, due to increased technology going into old buildings, creating hot spots.

Click here to find out more about Howden Group>>